The terms of a mortgage call for a borrower to pay $4,800 in loan discount points. If the mortgage is $80,000, how many discount points have to be paid

Rationale

6 discount points must be paid for the $80,000 mortgage.

In mortgage financing, discount points are upfront fees paid to reduce the interest rate on a loan. Each discount point typically costs 1% of the total loan amount, which in this case is $80,000, making 6 points equal to the $4,800 fee.

A (3) YOUR ANSWER

If only 3 discount points were paid, that would amount to $2,400 (3% of $80,000). This is insufficient to meet the required $4,800, which indicates that this choice does not reflect the correct number of points based on the mortgage amount.

B (4) YOUR ANSWER

Paying 4 discount points would cost $3,200 (4% of $80,000). While this amount is higher than 3 points, it still does not fulfill the requirement of $4,800, meaning this choice is also incorrect.

C (5) YOUR ANSWER

Five discount points would total $4,000 (5% of $80,000), which is still below the required amount of $4,800. Therefore, this option does not provide the necessary points to account for the loan discount fee.

D (6) CORRECT

Paying 6 discount points costs $4,800 (6% of $80,000), perfectly matching the fees outlined in the mortgage terms. This option accurately reflects the required payment to meet the mortgage conditions.

Conclusion

Calculating the cost of discount points against the mortgage amount reveals that 6 points are needed to fulfill the obligation of $4,800 for an $80,000 loan. Each point corresponds to 1% of the loan, and only by paying 6 points does the borrower meet the specified terms of the mortgage.

The terms of a mortgage call for a borrower to pay $4,800 in loan discount points. If the mortgage is $80,000, how many discount points have to be paid

6 discount points must be paid for the $80,000 mortgage.

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